Disclosure And Concealment In Consumer Insurance: Misrepresentation And Negligence

Discuss about the Disclosure and Concealment in Consumer Insurance.

This report will evaluate two case studies which are based on the issues of misrepresentation and negligence. The aim of this report is to provide legal advice to each party in the case study. In the first case, the issue of misrepresentation has raised which is referred to making a false statement or untrue statement in order to create a contractual relationship between parties. The false statement is made with an objective to attract another party into signing the contract. If a contract is formed between the parties based on misrepresentation, then it is a voidable contract. It means that the representee has the option to either validate the contract or terminate the contractual relationship. In the second case, the issue of negligence has raised between parties. It is referred to the failure to maintain a standard of care in order to avoid harm to an individual (Stewart and Stuhmcke, 2009). In case such duty is not fulfilled by a persona and duty to such failure another party suffered loss, then a suit for negligence can be filed by the aggrieved party. This report will provide advice to the party of the case studies based on these principles.

In the present case study, Angela is facing the issue whether a suit for misrepresentation can be filed against Jessica given that she had made a false statement about the profit of this business while entering into a contract with Angela. Before giving legal advice, it is important to understand the elements of misrepresentation. In case of misrepresentation, there are certain elements which are necessary to be present in order to ensure that the party is able to file a suit for damages. The first element of misrepresentation is that the breaching party must have made a false representation about a fact in order to attract another party to sign a legal contract. The objective of the untrue statement must be to influence the decision of another party and induce him in order to sign a legal contract (Derry v Peek [1889] 14 App Cas 337, McConnel v Wright [1903] 1 Ch 546 and Nocton v Lord Ashburton [1914] AC 932) (Watson, 2012).

Every misleading statement made by a party is not considered as misrepresentation, and the statement which is the mere opinion of a person or which is mere puff is not considered as a false representation (Esso Petroleum v Mardon [1976] QB 801). Any false statement which is made by a party regarding law is not considered as misrepresentation because it is considered that the information about the law is common and people know about such information (Pankhania v LB Hackney [2002] EWHC 2441) (Loi, 2012). It is also necessary to ensure that the person who is making the untrue statement is in the position in which he/she is expected to know about such facts (Smith v Land & House Property Corp [1884] 28 Ch D 7).

Advice for Angela

Furthermore, while entering into a contract, it is the duty of a person to disclose all the material facts especially when a party is in the position to know the truth. It is necessary that a contracting party must disclose information about all the material facts which any reasonable person would in such situation; failure of disclosure of material facts can be considered as misrepresentation (Lambert v Co-operative Insurance Society [1975] 2 Lloyd’s Rep 485) (Tarr, 2013). While determining a suit for misrepresentation, it is necessary that the representee must have relied on the false statement made by another party and based on such untrue statement he/she must have entered into a contract (Horsfall v Thomas [1862] 1 H&C 90). However, if the party of the contract check the validity of the statement or enter into the contract without relying on such statement than a suit for misrepresentation cannot be filed by the party (Attwood v Small [1838] UKHL J60). If an opportunity to check whether the statement is true or false is given to the representee, however, it was rejected by the representee than it is considered that the party had a reliance on the false statement (Redgrave v Hurd [1881] 20 Ch D 1) (Halladay, 2010). In case of misrepresentation, the contract becomes voidable, and the representee had the option to end the contract and claimed damages or continue with the contractual obligation.

As an owner of the business, Jessica was in a position to know about the annual profits of the business (Smith v Land & House Property Corp). The information was a material fact in the contract as well because based on the false statement Angela formed a contract with Jessica (Lambert v Co-operative Insurance Society). The untrue statement made by Jessica is considered as a misrepresentation. Jessica can argue in the court that Angela had checked the accounts, so she did not rely on her statement (Attwood v Small). But, Angela only checks the accounts of 2007, and she did not check the rest because she had a reliance on the statement of Jessica (Redgrave v Hurd). Therefore, a suit for misrepresentation can be filed because the contract is voidable and Angela can end the contractual obligation and claim for damages.

In the present case study, the Smiths family needs advice whether they can file a suit for negligence against Acme and claim damages. Before given the advice, it is necessary to understand each element of negligence without which the parties can not file a suit for negligence. While performing certain duties, a person has to ensure that he/she maintain a level of care in order to avoid injury to another party. Such care is required to be maintained by the party to avoid injury to others. In case such case is not taken, or the party breaches the standard of care, and it caused injury to an innocent party, then a suit for negligence can be filed (Stewart and Stuhmcke, 2009). There are a number of elements which are necessary to be fulfilled in order to claim compensation for the negligence of another party. The claimant is required to prove that the defendant had a duty to maintain a certain level of the case and such duty was breached by him that caused injury to the claimant. The court uses ‘neighbour test’ in order to ascertain whether the defendant owes a duty of care or not. This test was given by the court in Donoghue v Stevenson [1932] AC 562. There are two key elements which are necessary to be fulfilled by the parties in order to determine whether a duty of care is owed by the party (Bennett, 2011).

Elements of Negligence

Firstly, there must be a closeness or proximity in the relationship of the parties (Anns v Merton London Borough Council [1978] AC 728). The second factor is foreseeability or predictableness of the harm (Home Office v Dorset Yacht Co Ltd [1970] AC 1004 and Topp v London Country Bus [1993] 1 WLR 976) (Stephenson, 2012). In case both of these elements are present, then a person owes a duty to care which is required to be fulfilled by him. Another key factor is that the party must breach the duty due to failure to maintain a standard of care which any reasonable person would have in the particular situation (Wilsher v Essex [1988] 1 AC 1074). It is also necessary that a party suffers an injury in order to claim for negligence because if no harm has occurred than a claim for negligence cannot be instituted by a party. Other than these elements, it is necessary that the action of the defendant must cause the damages which are suffered by the party. The causation of the damages is a key element in the case of negligence. The court uses ‘but for’ test in order to determine whether the actions of the defendant caused the injury to the claimant (Jobling v Associated Dairies [1982] AC 794) (Burin, 2014). The test evaluates the situation by analysing that whether the injury of the claimant is caused due to the actions of the defendant.

The court asks in the test that the harm which is suffered by the claimant would not have happened but for the failure of maintaining a standard of care by the defendant such injury occurred (Barker v Saint Gobain Pipelines [2004] EWCA Civ 545) (Hedley, 2011). Based on this test, the element of causation is established by the court. Another key element of negligence is remoteness of injury or damages. The harm which is suffered by a person which is caused due to failure of maintaining a standard of care by a party must not be too remote unless the person cannot claim for damages (Re Polemis & Furness Withy & Company Ltd [1921] 3 KB 560 and Jolley v Sutton [2000] 1 WLR 1082). A party can not file a claim for negligence for the injury which is suffered by a party that is not caused due to the action of the defendant. It is an additional mechanism which is used by the court for controlling tortious liability of a party (Doughty v Turner Manufacturing Company [1964] 1 QB 518) (Martin, 2014). After proving all these elements of negligence, the claimant can demand damages from the party who failed to maintain a standard of the case due to which the defendant suffers injury.

Legal Advice for the Smiths Family

There are a number of elements which are necessary to be proved by the Smiths family in order to claim for compensation. Firstly, the court evaluated whether the party owed a duty of care. Based on the neighbour test, the drink which was manufactured by Acme Cola Company Limited is consumed by Andy, and it is a general fact that contaminated drinks can cause harm to the person (Donoghue v Stevenson). Therefore, a proximity relation exists between the party and the foreseeability of harm was present as well. Furthermore, the drink was sold by Acme even when it has remains of a cockroach based on which the cola manufacturer breaches the duty. After close examination it was found that the illness of Andy is caused due to drinking remains of a cockroach, therefore, the injury suffered by Andy are caused due to the direct actions of Acme (Barker v Saint Gobain Pipelines). Furthermore, the damages were not too remote which they were foreseeable kind, and Acme could have taken appropriate care to avoid such damages (Re Polemis & Furness Withy & Company Ltd). Therefore, a suit for negligence can be filed by the Smiths family, and they can claim the compensation for the financial crises faced by them due to a breach of the duty of Acme.

Conclusion

It can be seen from the above observations that legal advice is given after evaluation of the relevant laws and cases. In this report, two cases are discussed, and each case deals with a separate issue. In the first case, Angela was facing an issue whether she can claim compensation for misrepresentation. It is advised to Angela that she can claim compensation for the losses suffered by her which are a result of misrepresentation of Jessica. She can demand damages in order to compensate the loss suffered by her due to the untrue statement of Jessica. In the second case, the Smiths family suffered financial crisis due to paying the medical bill for Andy who suffered illness due to drinking remains of cockroach from the cola bottle. The party suffered the injury because of the negligence of the manufacturer. Hence, it is advised to the Smiths family that they should file a suit of negligence against the manufacturer. The injury resulted in the breach of the duty of the manufacturer. Therefore, a suit of negligence is valid in this case based on which the Smiths family can claim for compensation for the losses suffered by them.

References

Anns v Merton London Borough Council [1978] AC 728

Attwood v Small [1838] UKHL J60

Barker v Saint Gobain Pipelines [2004] EWCA Civ 545

Bennett, L. (2011) Judges, child trespassers and occupiers' liability. International Journal of law in the Built Environment, 3(2), pp.126-145.

Burin, A.K. (2014) What does it mean to suffer loss? Haxton v Philips Electronics. The Modern Law Review, 77(6), pp.994-1008.

Derry v Peek [1889] 14 App Cas 337

Donoghue v Stevenson [1932] AC 562

Doughty v Turner Manufacturing Company [1964] 1 QB 518

Esso Petroleum v Mardon [1976] QB 801

Halladay, J. (2010) Surviving a Fall into the Deep End. Denning LJ, 22, p.189.

Hedley, S. (2011) Tort. England: Oxford University Press.

Home Office v Dorset Yacht Co Ltd [1970] AC 1004

Horsfall v Thomas [1862] 1 H&C 90

Jobling v Associated Dairies [1982] AC 794

Jolley v Sutton [2000] 1 WLR 1082

Lambert v Co-operative Insurance Society [1975] 2 Lloyd’s Rep 485

Loi, K.C. (2012) Banks, agency and misrepresentation. Sing. J. Legal Stud., p.441.

Martin, J. (2014) Key Cases: The English Legal System. Abingdon: Routledge.

McConnel v Wright [1903] 1 Ch 546

Nocton v Lord Ashburton [1914] AC 932

Pankhania v LB Hackney [2002] EWHC 2441

Re Polemis & Furness Withy & Company Ltd [1921] 3 KB 560

Redgrave v Hurd [1881] 20 Ch D 1

Smith v Land & House Property Corp [1884] 28 Ch D 7

Stephenson, G. (2012) Sourcebook on Tort Law 2/e. Abingdon: Routledge-Cavendish.

Stewart, P.E. and Stuhmcke, A.G. (2009) Australian principles of tort law. Annandale: The Federation Press.

Tarr, J.A. (2013) Disclosure and concealment in consumer insurance contracts. Abingdon: Routledge-Cavendish.

Topp v London Country Bus [1993] 1 WLR 976

Watson, S. (2012) The tension in corporate governance: Keeping tabs on company health. University of Auckland Business Review, 15(1), p.38.

Wilsher v Essex [1988] 1 AC 1074